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Topic: Pound Foolish by Helaine Olen: is MMM part of the problem? (Read 18892 times)

I am an enormous fan of MMM combined with the YNAB system; in the last 3 years I have personally converted over 30 people to the power of conscious consumerism and stoicism. MMM's message is powerful to me because it offers well-constructed arguments and a community that supports my chosen way of life. At the same time, I must recognize that I am advantaged: I was raised middle-class; I graduated from college; my wife and I make over $150K/yr; I am male and white and healthy. I am an individual POISED to make all the right choices and get ahead with financial badassity.

With the transition from pensions to 401Ks, as well as decreasing social safety nets, Americans are increasingly responsible for their own financial well-being. This has created retirement HAVOC in the last 30 years. The solution has been to “teach” individuals “financial literacy.” If you are struggling, you must be illiterate.

In "Pound Foolish," Olen argues that "financial literacy" is at best failing and at worst a strategy of the "capital class" to maintain control over the "labor class." Olen rants against financial literacy gurus b/c they so obviously profit from strategies to navigate the increasingly complicated financial system with their "expert analysis" (i.e. Suze Orman & Dave Ramsey, among others). They rely on cyclical messages of doom and hope. They remind us we are drowning in financial responsibility: buy a home but read the fine print; invest in this stock NOW but not that one; build a 3 month, no, a 6 month, no, an 8 month emergency buffer; save 10%, no, 20% of your income; save for your kids college; you can AFFORD that 3yr car loan payment; don't pay down your mortgage too fast!; you say you're NOT making 12% annually in the stock market?!?! They offer the golden liferaft if you buy their book, call their sponsored financial advisors, attend their seminars. Duh, it's so easy!! They synergize and make millions.

MMM is different. Without forcing us to purchase his secrets, he espouses simplicity and the power of self-determination. But he is just another liferaft. I am floating, just like you, but even as the percent of Americans holding debt decreased from 2000-2011 (74%-->69%), the median debt increased ($51K-->$70K)!!!* Individualism is not working and will only drive further divide between the knowledgeable and the “suckas.” We Mustachians will be dry while the illiterate around us drown. We will be able to safely say to the 69% underwater, “you should have learned.”

Olen offered one very frustrating solution: discourse.

Therefore, I must say, I'm afraid that MMM's message will provide you and I too much comfort to vocalize the absolute fucking ridiculousness that is pervasive in this country's growing wealth gap. The message of individual choice and the educated consumer plays into the hands of corporations that advertise our insufficiency 2,500 times each day and the big banks that offer financial literacy courses at high schools, then offer graduates inflexible, high-interest student loans, credit cards, and ARM mortgages that will work out as long as they are responsible. Olen highlights the insane expectation that those profiting most from "financial literacy" education would ever desire or offer real change.

Once again, I do believe that MMM's message is powerful: if there is to be real social change in America, no one will be better positioned to steer that change than financially independent early retirees like you and I that can annoy the crap out of legislators and corporate giants!!! I see a disturbing and growing trend in these forums to distribute moral judgments on those soaked in financial foolishness. Successful Mustachianism should be an opportunity to drop the umbrella in the rain storm of financial advice, advertisements, doom and hope, and social convention to look up and recognize that our corporations and politicians are sitting in ivory towers, dry as a bone, pulling the strings that tip the buckets that make it rain.

I encourage everyone to read "Pound Foolish" and provide your thoughts on actionable solutions. I am in the middle of "Broke, USA" by Gary Rivlin and plan to offer a rant when complete (first thought: I didn’t realize that poor folks were such big business!).

Raay

Cry me a river. Being, but especially staying a financial illiterate is a choice, as is listening to anyone's advice. If you make the wrong choice, why expect other people to bear any part of the unfortunate consequences? I may personally regret that other people around me are dumb or just "think different", but ultimately I did not cause it and therefore it is not my responsibility to fix it. Nor even to come up with ideas of how to fix it - which MMM does - voluntarily to get his kicks.

Most well-intended political solutions are just thinly veiled attempts to force-shift responsibility from one group of people to another using some sort plausible but usually short-sighted excuse about "deserving". "Protect the weak" is such a very popular one. Instead of protecting the weak (and with them inevitably also the lazy and the dumb) from themselves, why not just show them how to become strong and let them act? Also, why does the author insult the "working class" as the one in need of this patronizing protection? Misguided at best.

Cry me a river... "Protect the weak" is such a very popular one. Instead of protecting the weak (and with them inevitably also the lazy and the dumb) from themselves, why not just show them how to become strong and let them act? .

This has often been my default attitude. But lately, I've been wondering; just because a person is dumb, does that mean they shouldn't be protected? It's not necessarily their fault they're dumb; intelligence is definitely determined by nature and nurture, neither one of which the individual has any control over.

I have mostly subscribed to the "oh well, they're dumb so they deserve what they get" school of thought, but I don't think it's necessarily right. Why would we want a society that is designed to take advantage of less intellectually gifted people? Why do we want a society where you always have to be on your guard, every wary of being bamboozled? It's exhausting and inefficient. Probably as inefficient as having tougher laws/rules/regulations trying to solve broad political/social problems.

Again, I don't have the answers, but it seems to me that blaming dumb people for not being smarter could be the same as blaming a slave for having the wrong skin colour; wrong-headed and cruel. I know that the individual does have some determination over their own intelligence and educational level, but we all know that not everybody is given the same intellectual gifts. Some get more, some less. Shouldn't there be a framework in place so that we can all be successful?

Also, why does the author insult the "working class" as the one in need of this patronizing protection?

Oh yes. Coming from a working class background I was first puzzled, then estranged and finally insulted when I heard time and again from my middle and upper middle class co-students what should be done to help humble folks like my parents. I have more than once pointed out that their definition of poverty and helplessness was well intentioned but misguided and that I know from experience. Not once did such a conversation result in interested questions like you would expect from people who supposedly want more working class kids to study and get a well paying job.

No. MMM is not part of the problem. Your thinking is part of the problem. Enabling people to make bad financial decisions only encourages more bad decisions. At this point I only choose Mustachian principles for fear of the consequences. If you're willing to support me with your surplus, then no need to for me to read MMM blog any longer.

Not sure if it's "financial illiteracy" which is the issue so much as pervasive (and most often voluntary) innumeracy. Sadly, it's become almost a norm for people to actually brag "I suck at math," "I hate math," "math sucks". The prevailing idea in Western society is that you can't possibly be cool and like math. The image of the dorky accountant or lone programmer working the dark basement come to mind. So, people parrot that they don't like math and ignore it with everything whenever possible because they want to fit in. Sadly, I think math is often difficult for people because they've been told it's difficult. Have you ever told a table of random people that you love math? I guarantee it will create an awkward moment where you may even hear crickets. If you tell them you love books/movies/art/sports it will likely be greeted with enthusiastic conversation. I'm pretty sure that the wealthy in society don't "suck at math", I'm betting they're pretty damn good at it.

As for making fun of spendthrifts for being foolish, driving mammoth SUVs, and trying to live a decadent life of insane luxury? I'll let others do as they will. It doesn't bother me at all. I don't think it drives them in the other direction.

Olen highlights the insane expectation that those profiting most from "financial literacy" education would ever desire or offer real change.

As for Ramsey, of course there is a conflict of interest.

But, this is a "problem" everywhere. Do doctors really want their patients to be healthy? Are taxes levied against smokers really supposed to decrease smoking? Do psychiatrists ever want their patients to feel good again? If we no longer talked about "financial literacy", she'd have one less book to write. etc etc etc.

Everyone has some amount of a vested stake in the status quo, because we've already organized our lives around it. It doesn't mean people are malicious. Her other book is about working in offices, but there's no reason to believe that her vested interest in officelife is causing her to write what she writes. A bad argument would say: she makes money from people who work in offices, of course she's against strategies that could make you less reliant on work.

And then, about the banks: She says (in a piece in the Guardian), that the financial literacy stuff doesn't work. This is where I get confused (not sarcastic confused, actually confused)--why do the banks still do it, if it doesn't make people more likely to afford their mortgage payments?

Cry me a river... "Protect the weak" is such a very popular one. Instead of protecting the weak (and with them inevitably also the lazy and the dumb) from themselves, why not just show them how to become strong and let them act? .

This has often been my default attitude. But lately, I've been wondering; just because a person is dumb, does that mean they shouldn't be protected? It's not necessarily their fault they're dumb; intelligence is definitely determined by nature and nurture, neither one of which the individual has any control over.

I think we may be talking about different kinds of dumb here. There is dumb as in uninformed or "slow" in comprehension - nothing wrong about that. In fact I know people who are slow, but inquisitive - they perform poorly compared to their brilliant peers, but they certainly do perform well enough.

Then, there is dumb as generally in unwilling to inform yourself or willfully choosing to act against better advice. The uncritical ungrateful aggressive dumb.

To me, the definition of stupidity is causing harm to others and oneself while claiming otherwise.

I'm not advocating a lawless dog-eat-dog society in which the unfortunate among us are denied help, exploited, or left to their tragic fate. However, if someone stubbornly refuses to change their mind or figuratively bites the hand which feeds them, then it's all appropriate that they should feel some rejection and misery. Except for health issues, accidents and being victim of external violence (e.g. born in wrong place), it is fairly safe to assume that if life seems very tough to you, then at least a part of that burden is of your own making - quite regardless of how high or low your IQ is. In this exceptional case, I think that "guilty until proved innocent" is a valid rule.

I'm not a dumb guy, but I came across this "financial literacy" purely by chance. A coworker, a family member, careful nudges led me to the well and eventually I stumbled across things like Ramsey and MMM. Beforehand I was like anyone else, racking up student loans and driving cars everywhere just because it seemed like the way to do things.

Many people just need to have that "aha!" moment, ya know? They're not dumb, they just haven't had the same life that you or I have led to get to this point, and maybe they never will.

Thanks for your thought provoking first post. Part of the reason I love this forum is that the level of intellectual discourse is so high. In fact, it is well over my head much of the time.

I'm trying to wrap my head around what you're saying and doing and putting it into my simplistic MMM mindset. Is your situation one of information overload or overthinking? Or do you read this sort of thing as an intellectual diversion and curiosity?

I just stumbled on this terrific discussing. It's the middle of my work day so I don't have much time to respond but I did want to answer one question:

"And then, about the banks: She says (in a piece in the Guardian), that the financial literacy stuff doesn't work. This is where I get confused (not sarcastic confused, actually confused)--why do the banks still do it, if it doesn't make people more likely to afford their mortgage payments?"

That's a very easy question to answer, sad to report. The banks promote financial literacy because it's great for their bottom line. Think about it for a moment. What would impact their finances more: spending a teeny, tiny bit of money pretending you can educate consumers to understand 100 page single spaced funky mortgages loaded with "gotcha" clauses or having the authorities step in to either ban such mortgages entirely, or at least have to offer the so-called "plain vanilla" mortgage, with it's easy to understand terms? Hint: guess what the banks spends millions of dollars making sure wasn't in Dodd Frank.

OK, I'll try to follow this and pop back in later or, more likely, over the weekend!

That's a very easy question to answer, sad to report. The banks promote financial literacy because it's great for their bottom line. Think about it for a moment. What would impact their finances more: spending a teeny, tiny bit of money pretending you can educate consumers to understand 100 page single spaced funky mortgages loaded with "gotcha" clauses or having the authorities step in to either ban such mortgages entirely, or at least have to offer the so-called "plain vanilla" mortgage, with it's easy to understand terms? Hint: guess what the banks spends millions of dollars making sure wasn't in Dodd Frank.

Thanks for joining! Sadly, you've robbed us of the reckless joy of inventing your responses for weeks. :(

I'm still confused how the two are connected. Have these classes had any functional impact on the legislation? I'm not at all sympathetic to banks teaching about finance, mind you, but I still don't really get the mechanism at work here. They would rather pay for classes than have mortgage restrictions in DF, but how do the classes keep mortgage restrictions out of DF?

I found this book to be a pretty interesting read. Olen starts the book with a mini-history of the personal finance industry, starting with S.F. (Sylvia) Porter's 1935 New York Post articles. The key takeaway from this overview for me was the difference between the public's negative reactions to Porter's increasingly ostentatious wealth, and that of finance gurus in the 1990s and beyond. While Porter continued to promote thrift, over her career she became increasingly rich and began appearing on television in diamonds. As Olen states, however, by the mid-1990s, gurus would attract admiration and emulation by appearing on television with ostentatious displays of wealth.

So in my view, one key difference between early personal finance columns or programs and those of today appears to be that gurus now tend to show people what they want and tell them what they want. Porter's mistake was showing people what they want and telling them what they need to do to get it - which of course is not what they want to hear. Another, as Olen outlines, is that interested third parties got in on the action too - advertisers.

Blogs like MMM are a sharp contrast with such 'gurus' in my view. MMM tells us, complete with virtual face-punches, what we need to do to get his lifestyle. He does not simply show up on a stage, dripping in diamond encrusted suits and multi-thousand dollar watches, shouting into a microphone things that make us feel good, and ‘inspire’ us to sign up for courses in the hundreds or thousands of dollars.

Olen also grapples with the ‘issue’ of women and money. Many financial books and products specifically targeting women have emerged in recent years and there are a few reasons for this, as Olen reveals. Firstly, women control quite a proportion of household finances - 5/6 married women are either jointly or solely responsible for their household finances (as Olen notes, this is a significant achievement given women could not own credit cards, for example, until the 1970s). Secondly, women are considered "financially challenged" - or so the industry would like to have us believe. Lacking confidence compared to their male counterparts may be a more accurate characterisation. As a specialist in women's finance more correctly put it, "both genders are woefully financially ignorant" (p. 159). Presenting women as financially challenged has worked wonders for the industry.

Personally, I agree with Olen's conclusion - that some men are quite conservative with money, while many women are capable of engaging in risky investment strategies and being greedy. These traits aren't tied to the genders, but they are reinforced when, as a number of studies Olen cites have shown, men and women are treated differently when it comes to financial advice, with women often being ignored if they show up with a male partner, being asked to come back with their husband if they show up alone, or being given far more conservative, paternalistic advice if they are single. Kudos to Charles Schwab and Co, who debuted a women's investing program which they ended up integrating intgo their mainstream program after realising it was better to "treat each investor as an individual with his/her own unique goals, experiences, and attitudes about investing" (p. 171) rather than grouping people based on stereotypes.

Another disturbing fact is revealed in the final chapter, chapter nine. This report http://cuffelinks.com.au/clients-understand-adviser-saying/ states that fewer than half of respondents in both Australia and the US were able to answer the five basic financial literacy questions (presumably even fewer could answer the full set of eight, which included three ‘sophisticated’ questions). One of the basic questions was about inflation. The inflation question was one of three underlined questions that researchers said were the most significant indicators of financial literacy. In the US, 87% of people got this question right, compared with 78% in Australia. Worryingly though, according to a study referenced by Olen, only half of Americans 50 and above - precisely the age group who should know for retirement planning purposes - have an accurate understanding of how compound interest affects their savings.

A variety of "fun" financial literacy fads have been developed by interested parties. Such as "Financial Football", sponsored by… Visa. You can learn how to manage credit and protect your credit rating, admirable goals indeed. The main thrust of the curriculum however is "How am I paying for this item today? Does it make sense? What is the best payment choice to make?" Of course, I want to shout "CASH!" but I suspect that the preferred answer is "Visa". As Olen states, the course will teach you when to buy a car (e.g. when it can help you get to work), but is unlikely to explain why you shouldn't buy a car on your credit card.And then there's Junior Achievement Finance Park, a "financial literacy theme park". Which sounds rather awesome, except that popular chains like Burger King pay $15,000 to $200,000 for shop fronts there, aiming to develop brand loyalty perhaps as much or more than instilling financial literacy.

Looking beyond what is easy and obvious may be advisable. There are lots of comparison websites out there - like http://mozo.com.au/ - make use of them to find the best deals. Ask your advisors how they make a living - commissions, fees, some combination? Work out whose side they're on. When you read a magazine article, check out what advertising appears in that issue - and then decide how seriously you'll take their claims. It takes a bit of extra effort, but I think we will find it worthwhile. I also think there's something to be said for classic books like The Richest Man in Babylon which aren't pushing any specific products, and even ones like The Intelligent Investor which likewise is more broad principles of analysis than recommendations. Even though these are quite dated (and for those of us outside the US, may have less relevant examples), I think that reading general principles and modifying them to fit your own circumstance may be more helpful than reading specific recommendations which may be biased (and many of the popular finance authors hail from the US in any case, so their advice is not always completely applicable here anyway). These are the sorts of things I’d like to see taught. To me, it’s not so much about financial literacy as it is about critical thinking and logic, alongside basic numeracy and literacy.

In sum, I found Olen's Pound Foolish to be a very interesting, easy read, and would recommend it to anyone who is looking for financial advice and wants to develop a bit of a checklist as to what to look out for, or for anyone who is a bit wary of some of the mega-stars of finance and has an interest in the "dark side" of personal finance.

I'm 55 pages into this book and will not likely read the rest of it, or perhaps I will skim it. The author uses the phrase "wealth inequality" too many times to engage me. I'm not up with that current popular notion.

It is written in an lively way, so that's great. I enjoyed the introductory chapter about how the writers in the Personal Finance industry got started. The author can bash Suze, Ramsey and the rest of them (which she does) and it's fine with me, I don't care, they are not my gurus.

But when she moves on to my bible, The Millionaire Next Door, I have to take issue. Olen points to Stanley's work as encouraging all to go out and start a business. She then shows us measures and anecdotes that illustrate the failures of small businesses. Gosh, really? I don't know how gullible she thinks I am, but I know the high failure rate of small businesses and as a devotee of MMND I'm not gonna take my $2 million and put it into a, for instance, cupcake business. While it is true that MMND illustrates that owners of small businesses are their typical millionaire, Stanley also included wealth charts for professions including engineers and government workers proving that a steady comfortable income gets you to the Millionaire mark readily, if you avoid the major financial pitfalls (divorce, high spending on non-appreciating assets, dependent adult children and their families, etc.) I distinctly remember that point about professions that can get you to the Millionaire mark, and how many engineers do we have on this MMM website? A lot.

The beauty of MMND is that it is NOT a "how to" book preaching that "if you do this then that will happen." It's just a summary of research about quiet, middle class millionaires and how they live. It's that simple.

Olen also, as an aside, disses the writing style of MMND as pedantic and dry and I don't remember it that way, honestly, this is my favorite book about finances.

My other beef with Olen's book (after only 55 pages, mind you) is her complete dismissal of "the Latte Factor." Lady, I work with and know personally Latte factor poor people. Read the "Overheard at Work" thread on this website. Anecdotal or not, we all see every day people who fritter away money that would sustain them well in retirement. Manicures, lunches out, and yes lattes--this stuff adds up, people! Olen deconstructs the math of a couple of personal finance writers who jumped on the Lattes-are-bad bandwagon, yet, in the end and regardless of how exactly finance writers presented the details of Latte-poverty, the Latte-dependent would be so much better off if they would watch their pennies and invest. So. Much. Better.

I cannot emphasize enough what I see around me every day, my immediate circle of friends, all around ages 50 - 60, who have made bad judgement after bad judgement with their finances. Loss of jobs and illness have NOT caused this. Greed and impractical money management and fantasies have fueled their situations.

While I agree with Olen that basic necessities of life (housing health care, education) have become more expensive when we compare them to the 1970's, 1980's and before, I also have done the math to see my personal inflation rate. And guess what? The ratio of my income to some of these life necessities is the same, and even slightly better now than back decades ago. Back then I was making around $13,000 and made an offer on a little old 2BR house at $35,000. Oh yeah, the mortgage interest rate was 14%. Now that same job pays around $35,000 and newer cute condos are listed at $78,000 to $85,000 with interest rates at 4%. Which is a better deal? Today's deal is the best.

The cost of my graduate degree, in today's dollars, would be $18,000. Yet people borrow $50,000 to get equivalent advanced degrees. WHY???

In summary, Olen's book has a decided point of view and it is, simplistically put, "It's not your fault that you are poor" as well as "Those financial gurus who blame you for being broke are wrong."' She's got an alternative point of view to Dave Ramsey et al, and that's fine. We need all reasonable opinions out there, so this book brings something valuable to the discussion of personal finance leadership. Some of you may like the philosophy better than I do.

In the fewest words possible, mustachianism is the answer to the wealth gap because:

Somebody making $35k/year strives to live on $30k/yearSomebody making $70k/year strives to live on $30k/yearSomebody making $200k/year strives to live on $30k/year

With mustachianism, the goal is a healthy lifestyle on basically the least amount of money practical. In USA, that falls somewhere around $30k/year in most areas, HCOL areas excepted. The wealth gap goes away in many ways because everybody is playing in the same sandbox. Sure, the first person won't retire until they're around 60-65, the second might retire by 50, and the third person may be retired at 30-35 (depending on what age they were making that income). Still, even after retirement they will still be living that same $30k/year middle-class lifestyle as everyone else.

Mustachianism is the answer to class warfare because it puts everyone in the same class - the wealthiest just have the option to retire sooner is all.

The book is not a book about increasing personal wealth. It's a book about the financial advice industry and as such, it's interesting.It's just that when someone cherry picks from my bible, Millionaire Next Door, and seems to misrepresent it, then I consider it fair game to do the same.

It's just that when someone cherry picks from my bible, Millionaire Next Door, and seems to misrepresent it, then I consider it fair game to do the same.

That's fair! I've heard nothing but good things about "Millionaire Next Door" and how it's helped so many people become prepared for retirement. (And I really wish the library here stocked it!) A person can devil's advocate against almost anything, and it seems in the past 10 years it's become a more popular position to take. Cherry picking against the intrinsic value of something of a whole (I think) is disingenuous.

It's just that when someone cherry picks from my bible, Millionaire Next Door, and seems to misrepresent it, then I consider it fair game to do the same.

That's fair! I've heard nothing but good things about "Millionaire Next Door" and how it's helped so many people become prepared for retirement. (And I really wish the library here stocked it!) A person can devil's advocate against almost anything, and it seems in the past 10 years it's become a more popular position to take. Cherry picking against the intrinsic value of something of a whole (I think) is disingenuous.

I am concerned about your library that does not carry this modern classic. Are you SURE that they don't own it? Most libraries are joined up in some sort of system where they can borrow from one another so that they don't have to own every title in the world.

I thought the book was an interesting read but it did make my blood boil a bit while reading because the whole premise really is that the entire financial system is stacked against you (you = average American) and did not focus AT ALL on personal responsibility. I do NOT blame (all) people who are poor for being that way, certainly horrible setbacks can happen to anyone, but at the same time, not all people who are poor are blameless. It's a combo of factors, the system and personal responsibility which probably contribute to people's situations, but a nuanced view doesn't make for a best-selling book.

In the fewest words possible, mustachianism is the answer to the wealth gap because:

Somebody making $35k/year strives to live on $30k/yearSomebody making $70k/year strives to live on $30k/yearSomebody making $200k/year strives to live on $30k/year

With mustachianism, the goal is a healthy lifestyle on basically the least amount of money practical. In USA, that falls somewhere around $30k/year in most areas, HCOL areas excepted. The wealth gap goes away in many ways because everybody is playing in the same sandbox. Sure, the first person won't retire until they're around 60-65, the second might retire by 50, and the third person may be retired at 30-35 (depending on what age they were making that income). Still, even after retirement they will still be living that same $30k/year middle-class lifestyle as everyone else.

Mustachianism is the answer to class warfare because it puts everyone in the same class - the wealthiest just have the option to retire sooner is all.

What about a single mother that makes $23k working two jobs? Or a 19 year old that had an abusive father, dropped out of high school, and works at the gas station for $18k? Not a ton of options but plenty of opportunities to make bad choices with long-term consequences (DEBT!!!).

I think the wealth gap allows the wealthy to do a lot more than retire sooner. For example, DW and I are on track to retire and live comfortably in our early 30's, pursuing micro-careers and further education. Our projected return on the wealth we have already accumulated will sustain us; making money will be optional! I will not stop working/pursuing/changing my interests (so many options!). I will accumulate a great amount of wealth in my life b/c I understand compound interest and market tendencies and how to find satisfaction in simplicity (MUSTACHIANISM). I plan to give my (potential) child enough money to fund high level education or, if he/she prefers a different pursuit, travel or business/investment. And he/she will definitely hear positive fiscal management messages while growing up. Wealth breeds wealth. But only for the wealthy.You could say that to mend my bleeding heart and thanks to my personal finance successes I can now invest in my social interests (so many options!), and that MMM is a good system to produce non-state social welfare, but don’t you tell me what to do because it is my choice to invest or not and I am surrounded by a culture that views selfish consumerism as power ("Wow, you ALREADY have an iphone6?!?!"). Social structures are supposed to counteract the worst of our intuitions. Automatic withholds are taught by MMM to prevent similar (personal) consumer tendencies! The focus on individual action (personal finance) is feeding our worst tendencies – specifically: 1) more please ; 2) me first.

Mustachianism is absolutely the best personal finance model available because it is highlights joy separate from consumerism, it’s that simple to accumulate wealth! Simplicity should not be confused with ease. We receive messages about consumption, power, complexity, fear, and hope through advertising at a rate so immense that it has become white noise (and that can be the POINT! Read, “Trust Me, I’m Lying” about media manipulation or learn about Partial Attention Realities). Frugality can be a very difficult choice against the constantly reinforced, perceived majority that can afford it. MMM allows a brief respite from a lot of complex emotional pitches tied to products to support some basic lies (i.e. your family is not safe, you are isolated, you deserve this, etc). Fuck an SUV! I don’t need to drive or consume technology or fly thousands of miles away to feel happy and safe!

So, YES, MMM is powerful, just as I’m sure Millionaire Next Door can be powerful. But they are fighting upstream.

POUND FOOLISH is an expose of a flashy industry that thrives on complexity, expert advice, hope and fear. I don’t think Olen is saying personal finance can never provide positive outcomes. I think she is saying that it is a way to prevent hearing the underlying hum of worsening social conditions - PF education is often sponsored by corporations that specifically profit from bad consumer choices (think interest rates, credit cards, overdraft fees, payday loans, mindless consumption, brand loyalty). Olen is highlighting one industry prescribing individualist solutions to social problems.

We are the richest country on earth, yet we have less than 50% job satisfaction, the highest national rate of incarceration BY FAR, and the #1 reason for bankruptcy BY FAR is health issues (60%!!!!!! Oh, and Exxon Mobile made $491 Billion last year.) That doesn’t seem like a country or a financial industry that is managing resources well, or focusing on the right solutions to predictable social issues. PF helped me (I am in the 95% in pay, I'm naturally skeptical, I'm male, I'm white, I'm introverted and educated, I'm lucky, I'm intelligent and healthy) but it can not address the underlying issues.

In the fewest words possible, mustachianism is the answer to the wealth gap because:

Somebody making $35k/year strives to live on $30k/yearSomebody making $70k/year strives to live on $30k/yearSomebody making $200k/year strives to live on $30k/year

With mustachianism, the goal is a healthy lifestyle on basically the least amount of money practical. In USA, that falls somewhere around $30k/year in most areas, HCOL areas excepted. The wealth gap goes away in many ways because everybody is playing in the same sandbox. Sure, the first person won't retire until they're around 60-65, the second might retire by 50, and the third person may be retired at 30-35 (depending on what age they were making that income). Still, even after retirement they will still be living that same $30k/year middle-class lifestyle as everyone else.

Mustachianism is the answer to class warfare because it puts everyone in the same class - the wealthiest just have the option to retire sooner is all.

What about a single mother that makes $23k working two jobs? Or a 19 year old that had an abusive father, dropped out of high school, and works at the gas station for $18k? Not a ton of options but plenty of opportunities to make bad choices with long-term consequences (DEBT!!!).

I think we should allow for the possibility that the economic situation could have stayed the same and what changed were attitudes about what level of comfort is acceptable. Some people will live at subsistence until social security takes over and this didn't used to be considered the huge tragedy that it is now.

Or what about the single mother or kid with the abusive father who grew up in a war-free country with clean drinking water and available emergency rooms and subsidized children's healthcare and 12 free years of schooling? This is a basic difference between two political viewpoints. Some want equal opportunity for all while others want equal outcomes for all and you just can't get the latter! There's no practical way! Absolutely, we can analyze the outcomes and see if they indicate problems with lack of opportunity, but simply the fact that some people are worse off than others isn't definitive proof that something is wrong.

I hear what you're saying about consumerism leading to more disastrous consequences, e.g., perhaps, shaming attitudes such that people go into debt to avoid looking "poor," but it strikes me as two sides of the same coin and MMM can help with part of it. To the extent that we can control our responses to consumerist messages (and absolutely some people have better resources to resist it than others and no one is in complete control of their response to it, particularly the people who think they are), it will lessen the value of pushing it so companies and values will pursue it less. That doesn't exclude a top-down approach.

I had a fairly cynical view of poverty compared to most of my friends when I first finished college. They my first job post-postgrad was researching and designing a 'youth homelessness' plan for the metro area that I lived in. (I was a small part of a very experienced team, I was in charge of the youth piece).

The research included a lot of interviews, focus groups and conversations with homeless kids all across the city. I found it incredibly difficult, not because they were dangerous or hard to be around (some of them were, but not an issue for me). It became very clear to me, very quickly, that the only difference between these kids and myself was that my parents and extended family were fantastic, supportive and stable. And for most of those kids their family was more dangerous than the streets.

When I was young I made lots of the usual mistakes. I got drunk here and there, I ran out of money, I racked up some debt. Though I never had to call my parents, and never wanted to, there was never any doubt whatsoever that if I was every really, truly stuck - my family would support me any way they could. The most I ever did was move back into my parents house a couple times (between semesters at college, after a backpacking trip etc). That was a fundamental difference between me and those kids - my stupidest errors had a safety net, and they had no net at all. Many of the kids had some form of mental illness on top of that, and they were basically discarded.

Note: a common theme was that while many of them were ignorant of how to build even a basic life, none of them were in any way lazy. Surviving on the streets is a 24 hour a day job.

The same applies to many people currently living in poverty but not on the streets. Limited options, limited understanding of their options, limited ways to learn about options. Culturally we have a punitive approach to poverty as well - we will provide help, but not unless people properly abase themselves and give up all their privacy and dignity. And we might take it away at any time.

That said, MMM is not part of the problem. This blog, and some other personal finance rationalists/stoics should be taught as a mandatory high school class. And a mandatory parenting class.

I do not think MMM himself has an especially problematic view. I have never seen him attacking the poor, the ill, or the disadvantaged. I view MMM as gearing himself toward a very particular type of middle-class consumer. I can't say the same for the forum.

I work in a public library in a working-class, majority-minority town and I can assure you that a lot of the problems I see are not solvable simply by being "smarter" with money. Problems like low literacy/kids reading and doing math way behind grade level, non-English-speaking parents, lack of health literacy, poor schools. All of these factors set people up to struggle from a very young age. And the thing that I think is amazing is that, despite all the political howling about disengaged parents causing these problems, what I see are parents who really care about their children and want them to succeed* -- parents who come to the library twice a week and check out stacks and stacks of books for their kids, who spend hours trying to help kids with their homework. People who freak out when they forget to return the stacks of books for a few days and end up with a $5 fine. Their lives aren't going to be fixed just by tightening their belts.

I am a big believer in education as an equalizer and I think it is a crime and a tragedy that the poorest kids in the US also have the worst schools and the least amount of extracurricular support.

*I realize this is a biased sample, but I see enough of these people that I can no longer believe the stereotype that all or even most poor kids are educationally disadvantaged because they have apathetic parents.

ML: after spending most of my adult life working in human services you are absolutely correct in your assessment. TV news likes to show the opposite so as to create negative feelings about the poor but is mostly not true.

I just can't listen to any post that says, individualism is not working. That's BS. Individualism equals freedom. And personal freedom is what it is all about.

Seems like individualism worked for you. Congratulations! However, there are millions of people in the US and elsewhere that suffer due to the selfishness and isolation that are often coupled with your argument. But please, if you're comfortable, keep your head in the sand.

I had a fairly cynical view of poverty compared to most of my friends when I first finished college. They my first job post-postgrad was researching and designing a 'youth homelessness' plan for the metro area that I lived in. (I was a small part of a very experienced team, I was in charge of the youth piece).

The research included a lot of interviews, focus groups and conversations with homeless kids all across the city. I found it incredibly difficult, not because they were dangerous or hard to be around (some of them were, but not an issue for me). It became very clear to me, very quickly, that the only difference between these kids and myself was that my parents and extended family were fantastic, supportive and stable. And for most of those kids their family was more dangerous than the streets.

When I was young I made lots of the usual mistakes. I got drunk here and there, I ran out of money, I racked up some debt. Though I never had to call my parents, and never wanted to, there was never any doubt whatsoever that if I was every really, truly stuck - my family would support me any way they could. The most I ever did was move back into my parents house a couple times (between semesters at college, after a backpacking trip etc). That was a fundamental difference between me and those kids - my stupidest errors had a safety net, and they had no net at all. Many of the kids had some form of mental illness on top of that, and they were basically discarded.

Note: a common theme was that while many of them were ignorant of how to build even a basic life, none of them were in any way lazy. Surviving on the streets is a 24 hour a day job.

The same applies to many people currently living in poverty but not on the streets. Limited options, limited understanding of their options, limited ways to learn about options. Culturally we have a punitive approach to poverty as well - we will provide help, but not unless people properly abase themselves and give up all their privacy and dignity. And we might take it away at any time.

That said, MMM is not part of the problem. This blog, and some other personal finance rationalists/stoics should be taught as a mandatory high school class. And a mandatory parenting class.

I agree with your post. Unlike most other places in the world where hardship and poverty are seen as a function of circumstances, in this country it's viewed as your own darn fault. It's a shame; no wonder why the poor in this country go into debt and have so many psychological ills.

POUND FOOLISH is an expose of a flashy industry that thrives on complexity, expert advice, hope and fear. I don’t think Olen is saying personal finance can never provide positive outcomes. I think she is saying that it is a way to prevent hearing the underlying hum of worsening social conditions - PF education is often sponsored by corporations that specifically profit from bad consumer choices (think interest rates, credit cards, overdraft fees, payday loans, mindless consumption, brand loyalty). Olen is highlighting one industry prescribing individualist solutions to social problems.

We are the richest country on earth, yet we have less than 50% job satisfaction, the highest national rate of incarceration BY FAR, and the #1 reason for bankruptcy BY FAR is health issues (60%!!!!!! Oh, and Exxon Mobile made $491 Billion last year.) That doesn’t seem like a country or a financial industry that is managing resources well, or focusing on the right solutions to predictable social issues. PF helped me (I am in the 95% in pay, I'm naturally skeptical, I'm male, I'm white, I'm introverted and educated, I'm lucky, I'm intelligent and healthy) but it can not address the underlying issues.

Are you connected to, or employed by the author? The reason I ask is because I can't shake the feeling that your review reads very much like a press release, with plenty of SEO keywords.

POUND FOOLISH is an expose of a flashy industry that thrives on complexity, expert advice, hope and fear. I don’t think Olen is saying personal finance can never provide positive outcomes. I think she is saying that it is a way to prevent hearing the underlying hum of worsening social conditions - PF education is often sponsored by corporations that specifically profit from bad consumer choices (think interest rates, credit cards, overdraft fees, payday loans, mindless consumption, brand loyalty). Olen is highlighting one industry prescribing individualist solutions to social problems.

We are the richest country on earth, yet we have less than 50% job satisfaction, the highest national rate of incarceration BY FAR, and the #1 reason for bankruptcy BY FAR is health issues (60%!!!!!! Oh, and Exxon Mobile made $491 Billion last year.) That doesn’t seem like a country or a financial industry that is managing resources well, or focusing on the right solutions to predictable social issues. PF helped me (I am in the 95% in pay, I'm naturally skeptical, I'm male, I'm white, I'm introverted and educated, I'm lucky, I'm intelligent and healthy) but it can not address the underlying issues.

Are you connected to, or employed by the author? The reason I ask is because I can't shake the feeling that your review reads very much like a press release, with plenty of SEO keywords.

Just curious.

No. I am trying to spread the message, which, by definition, must include the message.

POUND FOOLISH is an expose of a flashy industry that thrives on complexity, expert advice, hope and fear. I don’t think Olen is saying personal finance can never provide positive outcomes. I think she is saying that it is a way to prevent hearing the underlying hum of worsening social conditions - PF education is often sponsored by corporations that specifically profit from bad consumer choices (think interest rates, credit cards, overdraft fees, payday loans, mindless consumption, brand loyalty). Olen is highlighting one industry prescribing individualist solutions to social problems.

We are the richest country on earth, yet we have less than 50% job satisfaction, the highest national rate of incarceration BY FAR, and the #1 reason for bankruptcy BY FAR is health issues (60%!!!!!! Oh, and Exxon Mobile made $491 Billion last year.) That doesn’t seem like a country or a financial industry that is managing resources well, or focusing on the right solutions to predictable social issues. PF helped me (I am in the 95% in pay, I'm naturally skeptical, I'm male, I'm white, I'm introverted and educated, I'm lucky, I'm intelligent and healthy) but it can not address the underlying issues.

Are you connected to, or employed by the author? The reason I ask is because I can't shake the feeling that your review reads very much like a press release, with plenty of SEO keywords.

Just curious.

No. I am trying to spread the message, which, by definition, must include the message.

Thread dredge. I saw this book at the bottom of an Amazon page as a "you might be interested in this also". I found it very interesting and readable. The author clearly has a bias that there a systemic problems that tend to keep people in their income class. But that serves as a refreshing counterpoint to the usual PerFi book from orman, Ramsey, et al that just tells the reader they need to pick better stocks or buy more real estate and then massive profit will happen.

Definitely worth a read for anybody interested in the personal finance industry.

I just can't listen to any post that says, individualism is not working. That's BS. Individualism equals freedom. And personal freedom is what it is all about.

Freedom to be sick, old or vulnerable and unsupported by your neighbour? I think real freedom is living in a society that provides a public health system, good public education, and a culture of caring for your fellow citizens.

I read her book as well and have a different take on it. Steve Covey (7 habits of effective people) draws attention to the importance of distinguishing between those things you have control over, those things you have indirect or partial control over, and those things that you have no control over. I see Olen as drawing our attention to systematic factors that have led to a nationwide (and indeed international) crisis in how people manage their money. She is certainly correct in drawing our attention to how some so called financial gurus are taking advantage of people's insecurities for their own profit, and further that much of the advice these gurus provide is either misleading or downright mistaken. But whereas her cynical conclusion is that we must take political action to address the systematic factors that lead to peoples' financial insecurity (i.e. we should focus on things we have only indirect/partial or no control over), the gurus (and MMM) are focused on what we can do within the confines of a rigged system. In MMM's case, I'm inclined to think this reflects a genuine difference in their assessments of how bad things are. He repeatedly draws our attention to how self discipline and financial literacy can enable individuals with even modest incomes to become financially independent. He is far more optimistic than Olen. I think it also reflects a fundamental difference in perspective regarding where the locus of change should be. Olen seems to think things will only change if we engage in collective political action; MMM disagrees: meaningful change can and probably must come from individuals taking charge of their own destiny.

It's not even, necessarily, that some people are a little slow (though true in my case). If you grow up with parents/grandparents who are not financially literate, in a community filled with -mostly- people who are financially illiterate, then you'll turn out that way too. Throw in some ad hominem attacks on "tigtwads" who show any interest in saving and it becomes hard to go against the grain. It doesn't take smarts so much as the right attitude. After all, what is difficult, conceptually, about MMM principles? People grow up thinking it's normal to spend all your money between paychecks and to finance stuff you can live w/o. What is accepted as "normal" doesn't need to be fixed - as far as most people are concerned. When you decide to quit being "normal" you are ready for financial literacy.

I do believe that personal responsibility plays a role, but I also think Olen does a great job of showing that the deck is stacked against a lot of people. I thought it was very fitting to read in a time when the financial advising industry had a collective stroke at the prospect that they might have to act as fiduciaries and only make suggestions that are in their clients' best interests. As she points out, one brokerage firm admitted that they'd go out of business if they had to spend the individual time with clients to really find out what their goals and needs were. Their business model is not profitable without being predatory, and it was disturbing to read just how predatory some of the groups/companies/"advisors" really are.

I think personal finance needs to be taught in schools, but I don't think that is enough. When the offerings get so complex, your average Jane, even a highly educated Jane, isn't necessarily going to have the knowledge to parse through and determine whether it's a good idea. A lot of people naively assume that the government is going to stop personal finance industry if they are telling blanket lies or are being predatory...and that just isn't true.

A lot of people naively assume that the government is going to stop personal finance industry if they are telling blanket lies or are being predatory...and that just isn't true.

Ouch. If the government isn't going to take on the role of protecting citizens from predators, what's the point of having a government at all? Clean air and water legislation, laws governing the safety of all products (from toys for children to medicine) represent a proper role for government. I don't see why the financial services industry is somehow exempt from the oversight we expect when it comes to other products purchased by consumers. It might be naive on my part to think, particularly in this political environment, our government will indeed act. But surely it does have a responsibility for doing so.

Ouch. If the government isn't going to take on the role of protecting citizens from predators, what's the point of having a government at all? Clean air and water legislation, laws governing the safety of all products (from toys for children to medicine) represent a proper role for government. I don't see why the financial services industry is somehow exempt from the oversight we expect when it comes to other products purchased by consumers. It might be naive on my part to think, particularly in this political environment, our government will indeed act. But surely it does have a responsibility for doing so.

Having a responsibility to do so is a different conversation that whether it will or not.

If it does happen, then the financial services industry will kick and scream and pour millions/billions of dollars into influencing the government and/or writing the laws outright.

Unlike, say, water and toys and stuff, there's no "THINK OF THE CHILDREN!!!!" aspect to get people to organize.